What Happened to Bear Stearns?

I admit, I'm an idiot when it comes to the workings of the financial market, so I don't really get what happened with Bear Stearns, the subprime mortgage crisis, etc. Fortunately, I have friends who get this stuff and can explain it.

So what happened with Bear Stearns? Very simply if we think of them as a hedge fund that is massively leveraged then all you need to go wrong is for their assets to go down in value enough that some bad things start to happen. Those assests that went bad started with the securitized mortgages above. Instead of selling all their mortgage tranches off to hedge funds and pension funds Bear Stearns kept some of them. These are called residuals. All the primary investment banks kept some of these tranches. Why? Well, they had good returns. Often the tranches they kept were the worst - the equity tranche. Sometimes they kept them because they couldn't sell them to anyone. They should have known better but again you have people shooting for the moon. They could lose their job but they could also be retired by next year.